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[edit] Tyco International

For the unrelated division of Mattel, see Tyco Toys.
Tyco International Ltd.
Type Public (NYSE: TYC)
Founded 1960, incorporated 1962
Headquarters Incorporation: Hamilton, Pembroke, Bermuda
Operational/Corporate: Princeton, New Jersey
Key people Edward D. Breen, Chairman & CEO
Industry Conglomerate
Products Electronics, Healthcare, Aerospace, Plastic, Security, Industrial Products
Revenue ▲$40.960 billion USD (2006)[1]
Operating income ▼$5,474 billion USD (2006)[1]
Net income ▲$3.713 billion USD (2006)[1]
Employees 247,900 (2006)[2]
Website www.tyco.com

Tyco International Ltd. NYSE: TYC is a diversified manufacturing conglomerate incorporated in Bermuda, with United States operational headquarters in New Jersey(Tyco International (US) Inc.). Through mid-2007, major business areas of Tyco included electronic components, health care, fire safety, security, and fluid control. Subsequently the electronics and health care divisions were spun off.

Tyco International Ltd. has no connection with Tyco Toys, a division of Mattel or with Ty Inc; the manufacturer of the Beanie Babies line of toys.

[edit] Timeline

[edit] 1980s

Tyco acquisitions and growth:[3]

  • Mueller Company
  • Wormald
  • National Fire and Security
  • Hindle valves
  • Earth Technology Corporation
  • Thorn Security
  • ADT
  • Electrostar
  • Wells Fargo alarms
  • AMP (1998)
  • Siemens Electrochemical Components

[edit] 1990s

Cover scan of the final issue of Tyco World
Cover scan of the final issue of Tyco World

In 1992, Dennis Kozlowski became CEO of Tyco International, and for the next several years, the company adopted an aggressive acquisition strategy, eventually acquiring (by some accounts) over 1000 other companies between 1991 and 2001.

In 1993, Tyco launched The Pipeline, an internal employees newsletter; the title was later changed to Tyco World. Its final issue was published in April-May 2006.

In 1994 Tyco acquired National Fire and Security (Australia) from Tony Viscogliosi (a legend in the fire protection industry in Australia) for a reputed sum of $20m AUD. In later years this small but very profitable company would be doomed by the aggressive management metered down by Tyco.

Tyco was added in 1996 to the Standard & Poor's S&P 500 Composite Index, which consists of the 500 publicly-traded companies in the United States with the largest market capitalization.[4]

Prior to 1997, Tyco was incorporated in Massachusetts. That July it merged with a wholly-owned subsidiary of a smaller publicly-traded security services company named ADT Limited. Upon consummation of the merger, Tyco International Ltd. of Massachusetts became a wholly-owned subsidiary of ADT Limited, and simultaneously ADT changed its name to Tyco International Ltd., retaining the former Tyco stock symbol, TYC.[5]

After the merger, Tyco moved its incorporation to Bermuda in 1997, headquartered in the colonial capital of Hamilton. While publicly part of the merger (ADT was already incorporated in Bermuda), this move was controversial as it was seen as a use of a tax haven. This tax advantage was promoted in literature to shareholders and investors. A new subsidiary named ADT Security Services also formed out of the merger.

In 1999, just prior to a stock split, rumors of accounting irregularities surfaced. The rumors were strongly denied by Tyco's leadership, who accused the sources of selling Tyco shares short for personal gain. Partly in response to this, shareholders fought a proxy battle to reincorporate in Delaware, but this effort was rebuffed by the board of directors.

The same year, Tyco acquired two S&P 500 companies,[4] the electronics connector manufacturer AMP Inc. and the fuse maker Raychem Corp., in a US$3 billion buyout.[6]

During this time, Tyco spun off the deep-sea fiber-optic cable-laying division it had purchased from AT&T as Tyco Submarine Systems in a much anticipated IPO.

Throughout the 1990s, Tyco's earnings seemed to improve steadily, with many investors giving it blue chip status. In hindsight, this may have been an illusion generated by the ways in which the acquisitions were treated on the company's books. Unlike other companies where fraud and other charges were made public in 2001-03, such as Enron and HealthSouth, Tyco was never in a cash crisis.

[edit] 2000-Present

For the year ended September 2000, Tyco revenue exceeded $28 billion. Almost $2 billion that year came from the sale by a subsidiary of its common shares.[5]

On October 17, 2000, Tyco acquired Mallinckrodt Inc. for its Healthcare unit.[5] On January 4, 2001, it bought Simplex Time Recorder Company for $1.15 billion in cash from Chris Watkins, the grandson of the company's founder. By January 2002, Tyco merged Simplex with Grinnell Fire Protection to form an indirect wholly-owned subsidiary, SimplexGrinnell LP, the world's largest fire protection company. For the year ended September 2001, Tyco revenue exceeded $33 billion. The same year, the company more than doubled its long-term debt, by over $10 billion.[5]

In October 2001, the Engineered Products and Services segment acquired Century Tube Corp, and followed it by buying Water & Power Technologies in November 2001.[5] Also that November, the Tyco Electronics segment acquired Transpower Technologies.[5] The next month, the Plastics and Adhesives segment acquired LINQ Industrial Fabrics, Inc.[5]

In January 2002, Tyco announced a plan to split the company into four separate companies; however, this plan was abandoned after a downgrade in its credit rating and a significant drop in its stock price.[5] That month, the Tyco Electronics segment acquired Communications Instruments, Inc., and the Healthcare segment bought Paragon Trade Brands.[5] That February, the Engineered Products and Services segment acquired Clean Air Systems.[5]

Also in early 2002, the Fire and Security segment of Tyco acquired SBC/Smith Alarm Systems, DSC Group, and Sensormatic Electronics Corp.[5] During the first quarter of 2002, following the recession of the previous year, the electronics segment recorded a charge of over $2 billion, related to massive overcapacity of fiber-optic cable at that time, which in turn affected the in-process buildout of Tyco's global undersea fiber-optic network, known as Tyco Global Network (TGN). TGN generated a loss for fiscal 2002 of over US$3 billion, with a restructuring charge of over one half of $1 billion. Construction of TGN was completed in 2003.[5]

The electronics segment recorded over $1 billion in restructuring charges in 2002, over half for inventory write-down and the balance for facility closures that year. The fiber-cable overcapacity issue and other corporate problems in the second quarter of 2002 also led to a goodwill impairment of over half of $1 billion in the electronics segment, related to Tyco Submarine Telecommunications, which Tyco had fully acquired the prior year for the buildout of the underwater TGN. Another electronics segment goodwill impairment of a quarter of $1 billion related to sales issues in Power Systems, Electrical Contracting Services, and the Printed Circuit Group.[5]

Tyco also lost over a quarter of $1 billion in investment during 2002 in FLAG Telecom Holdings Ltd.[5] That year, it became embroiled in a massive scandal involving the excesses by its former chairman and CEO, L. Dennis Kozlowski, and other officers and directors. As a consequence, on June 17, 2002, Tyco filed federal suit against Mark H. Swartz, Tyco's former executive vice president and chief corporate counsel, and also against Frank E. Walsh, a former director.[5]

On July 8, 2002, Tyco divested its Tyco Capital business through an initial public offering, with the sale of 100% of the common shares in CIT Group Incorporated. It recorded the CIT divestment as discontinued operations for 2002, for a $6 billion loss, and as an almost US$7 billion impairment charge. That month, the Tyco Healthcare segment divested Surgical Dynamics, Inc.[5]

Edward D. Breen was appointed president, CEO, and chairman of Tyco for an initial three-year term on July 25, 2002. He had previously been president and COO of Motorola since his promotion at that company in January 2002.[5]

On September 12 and also on December 6, 2002, Tyco filed two federal suits against former CEO Kozlowski.[5] Also, on October 7, Tyco filed an arbitration claim against Mark H. Swartz, its former CFO and director. However, when Swartz failed to submit to the American Arbitration Association, Tyco on April 1, 2003, followed that with a federal suit against Swartz as well.[5]

For the year ended September 2002, Tyco revenue rose to nearly $35 billion. However, it suffered more than a $9 billion loss that year, which included the asset impairment write-down of TGN by over $3 billion, losses of nearly $2 billion for the two restructuring charges, and over $1 billion from the two goodwill impairment charges. In all, the net charges totaled nearly $7 billion of the loss that year. The stock price plummeted.[5]

On November 27, 2002, the State of New Jersey filed federal suit against Tyco and former personnel, with charges in part of violating the New Jersey RICO statute, stemming from the Kozlowski scandal.[5]

As a result of the scandal, Tyco and some former directors and officers were named as defendants in more than two dozen securities class-action lawsuits. Most of the cases were consolidated and transferred to the United States District Court for the District of New Hampshire and filed by court-appointed lead plaintiffs on January 28, 2003, as the case In Re Tyco International Securities Litigation, citing causes of action under the Securities Act of 1933 and the Securities Exchange Act of 1934. That March 31, Tyco made a motion to dismiss, which was granted in part over a year later, on October 14, 2004.[5]

On February 3, 2003, Tyco and some personnel were also named as defendants in an amended consolidated class-action federal suit brought on behalf of retirees in its Retirement Savings and Investment Plans, citing causes under the Employee Retirement Income Security Act. On December 2, 2004, the New Hampshire court granted in part Tyco's motion to dismiss.[5]

In 2003, in response to the Kozlowski scandal, the company adopted the Guide to Ethical Conduct in order to guide and advise employees as to correct procedures and warn of unethical practices and behavior. All Tyco employees are now required to take a brief ethics course and sign an ethics statement annually.

By year end in September 2003, revenue was again up, reaching close to $36 billion and the company returned to profitability, by nearly $1 billion, that year, despite more asset impairments and other charges totalling nearly $2 billion. Over half of $1 billion of that was a charge in the Fire and Security segment related to ADT Security. The loss from TGN in 2003 was under three-quarters of $1 billion, and the business was then held for sale by Tyco the following year. Notably in 2003, the US dollar fell strongly against the euro. The change in foreign exchange rates benefitted Tyco, accounting for $1.7 billion of the increase in revenue that year.[5]

In November 2003, Tyco International Group S.A. issued $1 billion in ten-year notes at 6.0% in a private placement offering, which was then used to pay down a portion of $2 billion outstanding in the revolving credit facility due 2006. That November 18, Tyco purchased nearly $2.5 billion of zero coupon debentures due 2020.[5]

In early 2004, Tyco began a divestiture program following a review of its core businesses the prior year. Part of the plan was to sell TGN, which by then had been entirely written off in value, and agreement for the sale was reached that November. In the second quarter of 2004, ADT Security sold off Sonitrol. In all, within its divestiture program, by fiscal year end of 2004, Tyco had divested 21 businesses and liquidated four non-core businesses, primarily within the Fire and Security segment.[5]

In September 2004, Tyco also divested Electrical Contracting Services from the electronics segment, due to a decrease in sales. After September 30, Tyco divested an additional seven non-core businesses, bringing the program aggregate proceeds up to $500 million that year.[5]

By the end of 2004, Tyco employed under 260,000 people, with two-thirds outside the United States. Revenue was up strongly, to over $40 billion for the first time. Once again the strengthening euro against the dollar helped Tyco, accounting primarily for $1.5 billion of the increase in revenue. Various charges, losses, and debt repayment totaled nearly $1 billion in 2004, however profitability tripled that year to almost $3 billion. Also, Standard and Poor raised Tyco's long-term debt rating to BBB from BBB-, along with upgrades from Moody's and also from Fitch. Since at least 2000, Tyco's quarterly dividend had remained at US$0.0125 per share. On December 9, 2004, the board of directors approved an increase to $0.10 per share.[5]

In 2005, Videsh Sanchar Nigam Limited (VSNL), India acquired the Tyco Global Network (TGN) from Tyco International for $130 million. The chief stockholder in VSNL is India's Tata Group, also one of that country's largest conglomerates. It was once valued at $3 billion during the telecommunications bubble.

[edit] Company separation

An announcement was made publicly on January 13, 2006, that the company would subdivide into three smaller independent companies.

An official "Separation Management Team" was created to deal with all aspects of the separation and to make it as smooth as possible for customers, employees, and shareholders. Bob Scott was announced as its leader.[7] Scott had joined Tyco in 2004.

On June 29, 2007, Tyco completed the share distribution separating the company into three wholly independent, publicly traded companies,[8] [9] [10] each with its own board of directors, CEO, management staff, and financial structure.[11]

The three new companies became:

  • Covidien Ltd., formerly Tyco Healthcare
  • Tyco Electronics Ltd.
  • Tyco International Ltd. (New), formerly Tyco Fire & Security and Tyco Engineered Products & Services (TFS/TEPS)

Edward Breen, CEO of Tyco at the time of the split, announced that he would be staying on as CEO of the newly structured Tyco International, overseeing TFS/TEPS.

Completing the share distribution, on June 29, shareholders received one common share each of the two new companies, Covidien and Tyco Electronics, for every four common shares held of the old Tyco International stock. That July 6, the new Tyco International issued a one-for-four reverse stock split.[11]

[edit] Corporate scandal of 2004

Former chairman and chief executive Dennis Kozlowski and former chief financial officer Mark H. Swartz were accused of the theft of $600 million from the company. During their trial in March 2004, they contended the board of directors authorized it as compensation.

During jury deliberations, juror Ruth Jordan, while passing through the courtroom, appeared to make an "okay" sign with her fingers to the defense table. She later denied she had intended that gesture, but the incident received much publicity (including a caricature in the Wall Street Journal), and the juror received threats after her name became public. Judge Michael Obus declared a mistrial on April 2, 2004.

On June 17, 2005, after a retrial, Kozlowski and Swartz were convicted on all but one of the more than 30 counts against them. The verdicts carry potential jail terms of up to 25 years in state prison. Kozlowski himself was sentenced to no less than eight years and four months and no more than 25 years in prison.

[edit] Products

Tyco Fire & Security headquarters in Boca Raton (also home to ADT, Sensormatic, and SimplexGrinnell)
Tyco Fire & Security headquarters in Boca Raton (also home to ADT, Sensormatic, and SimplexGrinnell)

Some of the many products made by Tyco include:

  • Fire alarm systems (Simplex)
  • Fire-fighting hardware and foam concentrates (Ansul, Skum, Total Walther, and Sabo)
  • Electronic components and cables (AMP)
  • Circuit protection devices
  • Critical communications systems (OpenSky and EDACS)
  • Engineering services
  • Fire sprinklers (SimplexGrinnell, Wormald)
  • Medical supplies (Kendall wound care, Monoject syringes, Shiley endotracheal tubes)
  • Pharmaceuticals (leading producer of narcotics and acetaminophen), Mallinckrodt laboratory chemicals)
  • Security systems (ADT, DSC)
  • Curad-brand bandages
  • Valves and controls
  • Pressure-relief valves for nuclear power generation
  • Safety products (including industrial-site safety & personal protective equipment (PPE))
  • EAS (electronic article surveillance) & RFID (radio frequency identification) products ([Sensormatic])
  • CCTV / Access Control Equipment (American Dynamics, Kantech, Software House)
  • Touchscreen displays (ELO touch displays)

[edit] Environmental Record

Due to the Clean Air Act (CAA), Tyco International (US) Inc. was fined over $1.1 million for its previous metal forming and finishing facility in Hamburg, New Jersey because it failed to comply with requirements under CAA regulations.[12] The facility, which Tyco operated from 1963 to 2000, operated trichloroethylene to degrease chromium to metal parts, which are among some of the most toxic, dangerous air pollutants that could cause serious health effects.[13]

In regards to the Clean Water Act, a health and safety manager from Enfield, Connecticut, was sentenced guilty on August 5, 2002 for deliberately routing wastewater produced in one of Tyco’s manufacturing facilities around a sand filter; it was supposed to remove impurities from the wastewater before discharging into the Manchester sewers.[14] The company used this bypass in order to accelerate production and lessen use of the waste treatment system.[15] However, the wastewater discharged from the factory exceeded the levels of copper and lead, which were both toxic metals and could have led to harmful effects if passed through sewage treatment plants.[16]

[edit] See also

[edit] References

  1. ^ a b c http://library.corporate-ir.net/library/11/112/112348/items/228454/AR_2006.pdf
  2. ^ Standard and Poor's Corporation (2007). Standard and Poor's 500 Guide. New York: McGraw-Hill. ISBN 0071479066. 
  3. ^ (2003). "List of Major Tyco Acquisitions" (.PDF). . Tyco International, Ltd. Retrieved on 2007-08-05.
  4. ^ a b Sam Stovall, Sector Investing, McGraw Hill, 1996, Appendix A, The S&P 500 Composite Index, ISBN 0-07-052239-1
  5. ^ a b c d e f g h i j k l m n o p q r s t u v w x y z aa ab 2004 Annual Report
  6. ^ Bernard Levine. "Tyco in US$3 Billion Buyout of Raychem", Electronic News, 14 May 1999. Retrieved on 2007-08-05. 
  7. ^ (2005). "Biography: Bob Scott" (.PDF). . Tyco International Retrieved on 2007-08-05.
  8. ^ ABC News
  9. ^ Official Tyco press release
  10. ^ Tyco Separation Update press release
  11. ^ a b Important Tax Information Concerning the Distribution of Tyco Electronics Ltd. and Covidien Ltd., July 3, 2007
  12. ^ [ http://www.justice.gov/opa/pr/2007/April/07_enrd_266.html Department of Justice] retrieved 27 April 2008
  13. ^ [http://yosemite.epa.gov/opa/admpress.nsf/d0cf6618525a9efb85257359003fb69d/f97200355e49f8d08525739400665c42!OpenDocument Environmental Protection Agency] retrieved 28 April 2008
  14. ^ [ http://yosemite.epa.gov/opa/admpress.nsf/b1ab9f485b098972852562e7004dc686/4caa9a90f097601d85256c24005d8426?OpenDocument Environmental Protection Agency] retrieved 28 April 2008
  15. ^ [ http://www.usdoj.gov/usao/ct/Press2004/20040817-2.html United States Attorney's Office District of Connecticut] retrieved 28 April 2008
  16. ^ [ http://yosemite.epa.gov/opa/admpress.nsf/b1ab9f485b098972852562e7004dc686/4caa9a90f097601d85256c24005d8426?OpenDocument Environmental Protection Agency] retrieved 28 April 2008

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